Vacation Homes and Divorce
Equitable distribution is the fancy way we describe how property is divided in the Virginia divorce process. Under equitable distribution, the court looks at all a couple’s assets (the things that are worth money) and liabilities (yes, your debt gets divided, too!) and makes a determination about what each former spouse should take away from the marriage.
How are assets and debts divided in Virginia?
There are two ways that assets and debts can be divided in Virginia divorce. Either an agreement is reached between the parties, where they themselves decide how everything will be divided (called a separation agreement), or a judge decides.
That’s it. Those are the only two ways. Either you agree, or you don’t, and the judge will tell you how it’s all going to go down.
What do you prefer? Well, it all depends. Most people would prefer to reach an agreement themselves, because it gives them a greater amount of control over the process. It also minimizes the expense, both in dollars and in blood pressure points. If you’ve got children together, it makes coparenting easier because you hate each other just a teensy bit less than if you had to go to court and argue over every single point. All relevant considerations.
Still, sometimes it’s necessary to go to court. If he won’t sign an agreement, or if he won’t give you your marital share of an asset. When it comes to divorce, we’re usually talking about tens or hundreds of thousands of dollars in assets – money that, when it comes to starting over, you’ll sorely need. Few people can afford to walk away from something big in an effort to just settle and get it over with. So, sometimes, it’s necessary to go to court anyway.
Are assets and debts always divided 50/50?
Not necessarily. Under equitable distribution, the judge can consider other factors – like the negative and positive monetary and nonmonetary contributions each spouse made to the marriage – to determine what is equitable in each case. Adultery, for example, is a negative nonmonetary contribution. A gambling addiction, on the other hand, is a negative monetary contribution. A job is a positive monetary contribution, and running carpools, grocery shopping, and meal prepping is a positive nonmonetary contribution, just to give you an idea.
Don’t make a naïve mistake and assume that “equitable” means “fair.” If you looked it up in the dictionary, you might assume that to be the case – but if you tell the judge “That’s not fair!” you’re likely to get a chuckle or a scoff. Fairness really isn’t all it’s about. And, in fact, in practice, most property division does wind up fairly close to 50/50 anyway, even though the law gives the judge freedom to consider these things, the judge generally finds that 50/50 is most equitable anyway.
After all, does a person’s adultery necessarily mean they should receive no proceeds from the sale of the house? It doesn’t exactly translate that his (or her!) inability to stay faithful to the marriage should make them essentially financially insolvent or unable to afford a new place to live in the wake of the breakdown of the marriage. And though you may wish it were the case, most judges find that financial ramifications don’t equitably follow from these negative monetary or non monetary contributions – or potentially that the positive monetary and non monetary contributions outweigh the negatives? Hard to say, exactly, what their specific justification is, except that, in general, we find that these things don’t impact equitable distribution like you think they might. However fair or unfair you might find this, suffice it to say that fairness is really not the barometer most judges use to judge what might constitute equity.
Under equitable distribution these things COULD theoretically be taken into account, but don’t hang your hat on it. In most cases where it does end up impacting the way property is divided, we’re talking a pretty serious case where one party’s contribution was so bad that it significantly impacts the other party’s portion of the marital assets. For more information on this, or to talk to an attorney one on one about your case, give our office a call at 757-425-5200.
Vacation Homes and Divorce
A vacation home is divided in equitable distribution, just like the marital residence. After all, it’s all real estate!
First thing’s first: we’ve got to classify the home as either marital, separate, or hybrid property, to determine how it would be divided in the divorce.
Marital, Separate, or Hybrid Property
Marital property is anything earned, purchased, or acquired during the marriage, regardless of title. So, even if it’s in his name only, or your name only, if it was purchased during the marriage, and paid for with marital funds, it’s marital and will be divided in divorce – likely fairly close to 50/50.
Separate property is property that was earned, purchased, or acquired before the marriage, or something that you were given or inherited during the marriage from someone other than your spouse. If the house was given to you by your grandfather, or you inherited it from your grandfather when he died regardless of whether that was before or during the marriage, it’s yours separately.
Hybrid property is a combination of the two: part marital, and part separate. If it was something that was purchased before marriage, but then after the marriage you continued to make mortgage payments on it from marital funds, then it’s hybrid. That means the separate portion stays separate, and the marital portion can be divided.
Dividing the home
The marital portion of the home will be divided in the divorce. If it’s separate, then you’re done – ta da! – and it’ll go to the party who owns the separate interest in it.
If it’s hybrid, you’ll have to look at what portion is marital and what portion is separate. Maybe one party wants to buy out the other party’s interest. Maybe you want to sell and split the proceeds, less the separate portion.
But if it’s marital, what are your options?
Good question! When it comes to houses, there aren’t a lot of options. You can either:
1. Sell the house, Split the Equity
The most obvious solution is to sell the house. You can split the equity, provided that there is any, between you after closing costs, the realtor’s commission, the outstanding mortgage(s), and other fees (or any liens, etc) have been paid.
2. Buy out the other party’s interest
If one of you wants to keep the house – either as a vacation home or as a principal residence – that’s fine, too. You’ll have to qualify to refinance for the existing mortgage balance and your partner’s share of the equity (or vice versa, of course, if he’s buying you out), unless you have some other means of paying him his share of the equity. It would be possible, for example, to give him a greater share of your retirement (or take a lesser share of his), or something like that in order to compensate for the equity in the home. You could also give him a greater share of assets in the bank, or something similar, keeping in mind, of course, that the liquidity of your various assets could be an issue. (Not everyone can afford to forego equity on the home in favor of additional capital in retirement accounts if they aren’t old enough to receive payments on those retirement accounts yet.)
Refinancing is almost always necessary, though, in order to get the other party’s name off of the deed and the mortgage. Mortgage companies don’t just let people off the hook where real estate is concerned; you’ll have to go through the proper channels to have your name (or his) removed from those documents and put the house under one person’s sole name.
Whether it’s a vacation home or a primary residence, your options are essentially the same. The best part, though, is that the more assets you have to divide, the more you’ll have to walk away with at the end of the process – provided, of course, that there’s equity to divide.
For more information, or to talk one on one about your real estate holdings and other assets, give our office a call at 757-425-5200.